Posted on 07/20/2003 2:08:36 PM PDT by nickcarraway
Sunday, July 20, 2003 - SAN JOSE -- Peter Kerrigan encouraged friends to move to Silicon Valley throughout the 1980s and'90s, wooing them with tales of lucrative jobs in a burgeoning industry.
But he lost his network engineering job at a major telecommunications company in August 2001 and remains unemployed. Now 43, the veteran programmer is urging his 18-year-old nephew to stay in suburban Chicago and is discouraging him from pursuing degrees in computer science or engineering.
"I told him, 'Unless you're planning to do this as a path to technical sales, don't do it,' said Kerrigan, who lives in Oakland.
He won't be able to have a career designing and building stuff because all those jobs have moved to India.
Like many unemployed programmers, Kerrigan blames the sour labor market on offshore outsourcing -- the migration of tech jobs to relatively low-paid contractors or locally hired employees in India, China, Russia and other developing countries.
The hemorrhaging of tens of thousands of technology jobs in recent years to cheaper workers abroad is already a fact of life -- as inevitable, U.S. executives say, as the 1980s migration of Rust Belt manufacturing jobs to Southeast Asia and Latin America.
But a new wave of technology outsourcing -- involving tasks that involve greater skills -- could be cutting to the industry's bone, threatening to prolong the three-year U.S. economic downturn.
Some who oppose the trend, which such industry stalwarts as Hewlett-Packard, IBM, Dell and Microsoft are embracing, believe it could even usher in the end of American domination in technology.
"We're giving countries like China and India the support they need to build up their technology industries, and the result could disadvantage us in the long run," said Phil Friedman, an electrical engineer and chief executive of New York-based Computer Generated Solutions, a 1,200-employee software company that targets the apparel industry.
"We outsourced electronics manufacturing. We're closing steel mills. Every week, 400,000 people file for new unemployment claims," said Friedman, a 54-year-old Ukrainian native who immigrated in 1976. "At the same time, we're shipping tech jobs offshore -- it's a shortsighted approach and cheats the American work force."
Cost-conscious executives have been shifting lower-level tech jobs in data entry and systems support abroad to cheaper labor markets for more than a decade. But now they are exporting highly paid, highly skilled positions in software development -- jobs that have been considered intrinsic to Silicon Valley and tech hubs such as Seattle; Boston; and Austin, Texas.
Critics say it's the equivalent of exporting not just the automobile industry's assembly line jobs -- but the core engineering and car design jobs, too.
Roughly 27,000 technology jobs moved overseas in 2000, according to a November study by Forrester Research. It predicts that number will mushroom to 472,000 by 2015 if companies continue to farm out computer work at today's frenzied pace.
According to Forrester, companies in the United States and Europe will spend 28 percent of their information technology budgets on overseas work in the next two years.
Boeing, Dell and Motorola have opened software development centers in Russia. Intel employs 400 full-time Russian software research engineers and nearly 200 others in marketing and sales, wireless Internet access and modem projects.
Santa Clara-based Intel entered the Russian market with a small contract project three years ago. But within months, the world's largest chip maker hired all the programmers who write compiler software to optimize the microprocessors' performance, and opened the Russia Software Development Center in Nizhny Novgorod.
"We intend to invest in the fastest-growing markets, and those are India, Russia and China -- that's the long-term plan," Intel spokesman Chuck Mulloy said.
Microsoft is adding software development jobs at its India Development Center in Hyderabad, opened in 1999 to create versions of Windows for giant corporate computers.
Bill Gates said late last year that the expansion was part of an estimated $400 million in corporate investments in the subcontinent.
On its corporate Web site, Microsoft lists dozens of Hyderabad openings, many requiring five years of experience, fluency in multiple computer languages, and college degrees in computer science -- far from the hourly telemarketer jobs that financial services and insurance companies exported to the Philippines and elsewhere in the early'90s.
Some say sending those jobs abroad may cause American tech workers' wages to stagnate.
According to the nonpartisan Economic Policy Institute, non-inflation-adjusted wages for tech workers grew 1.7 percent between the fourth quarter of 2001 and the fourth quarter of 2002 -- not enough to keep up with the period's inflation rate of 2.2 percent.
The average computer programmer in India costs $20 per hour in wages and benefits, compared to $65 per hour for an American with a comparable degree and experience, according to consulting firm Cap Gemini Ernst & Young.
But executives say outsourcing offers advantages beyond wage differences.
Jean-Marc Hauducoeur, a senior vice president at Cincinnati-based human resources consulting firm Convergys, said his 47,000-employee company will employ 6,000 customer service representatives and network engineers in India by year's end.
Convergys' average technical employee in India stays on the job for nearly three years -- more than double the U.S. average, saving tens of thousands of dollars in recruitment and training per employee per year, he said.
People in India are very ambitious and very well-educated, but they're also ready to invest in a company, and they have less of a tendency to move out of the company, Hauducoeur said.
Many U.S. corporate executives say they simply can't afford to overlook foreign computer workers -- especially in India, which produces roughly 350,000 college engineering graduates annually.
Bob Pryor, who heads the outsourcing practice of Cap Gemini Ernst & Young, said it's naive to think outsourcing software jobs could ruin America's tech dominance.
"The reality is that we live in a global economy and we compete against global players. We need to look at where we have strategic advantage -- whether it's resources or skills," Pryor said. "It frees up people and dollars to do much more value-added strategic things for clients."
Marcus Courtney, a former contract worker for Microsoft and Adobe Systems and president of the Washington Alliance of Technology Workers, said many tech workers understand and even endorse free trade and globalization.
"They even enjoy living on the cutting edge -- taking courses in advanced computer languages, getting experience in a variety of business disciplines, and endorsing a philosophy of continuous improvement," he said.
But many find it tough to reconcile their macro-economic outlook with their own unemployment.
"We need to move beyond the idea that individuals can simply cope and retrain," said Courtney, whose 275-member union is asking Congress to study and possibly regulate offshore outsourcing. "Workers need a voice over their economic future and a voice against the executives making these unilateral economic decisions."
The jobs issue could well cost us the White House...and the House. Maybe even the Senate.
I think if ANY demorat, including Hillary, addresses these issues, GW is going to go the way of his father. But then again, the demorats are bought and sold to the same multi-national corps as the Repub's, so there isn't much to worry about. Just keep watching the USA export all of our jobs.
It wasn't the same America, either. Now, if you are on the leading edge, your rewards are heavily blunted by the taxes you pay to carry the now unemployable.
The outsourcing problem is to some degree analagous to the illegal migrant worker problem in this sense: The savings to the companies are illusory--companies save, but by shifting costs to society at large. Its a lot like the tragedy of the commons.
You can't easily retrain and re-employ a moderately skilled 50ish worker whose employment has gone offshore for a long and new career; and the dislocations in his life -- sell the house, long term unemployment, etc -- are picked up by the rest of us.
There are examples which mask the basic argument, such as when industries truly become obsolete or require very little skill and initiative--like buggy whips. That is only partially the case with programming. It is also interesting the liberal policy of the US universities in welcoming foreigners in the name of diversity and the spirit of education hastens this sort of reckoning.
Over time, competition means everyone has to work smarter to do well. However, it isn't in the common interest to hasten international competition when you consider the overall costs.
Such as converting client systems to PeopleSoft??
Gee: that's a value-added-strategic-planning road to INDICTMENT for E&Y--now suspected of being on the take from PeopleSoft for pushing those systems to clients who simply did not need them.
Yup, value-added theft, fraud, and collusion.
General McAulffie would dispute that statement.
I didn't hear about this. Are you telling me these guys were peddling somebody's wares while taking the client's money to act as an 'independent' consultant? Did they caught at that?
FYI (and I spent several years in the IT consulting biz...)
In Milwaukee, Madison, Green Bay, the average salary is now around $60K, or about $30.00/hour. Another $15./hour is bennies; the balance is the arbitrage given to the contracting house.
It may be the case that in other parts of the country the salary is up to $35 or $40./hour, in which case your estimate of 'total' (fully-loaded) compensation is about accurate.
But I suspect that the $65./number includes the contracting firm's take...
Yes this is true, when a majority promotes the re-election of people who endeavor to make government your means of well being. Of course the visionary thinkers know better than to think this can be maintained for more than a short period of time.
Your concern with the economy as it relates to you is understandable.
I'm retired, son. I'm concerned about my country and my children, grandchildren.
What are your concerns beyond electing the next globalist?
So your against free trade? What are you for then?
Whom are you refering to as a globalist that I'm so inclined to elect?
Where does free trade exist?
I'd say nowhere, but venture to say the CLOSEST you can come will be Uncle Sucker and some third world countries.
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